1The German automotive industry, a core industry of the nation’s economy, employed approximately 800.000 workers and produced up to 5.9 million vehicles annually in the early 21st century. However, since 2019, the sector has faced a decline in production and employment, with projections indicating a potential loss of nearly 190.000 jobs by 2035. While Germany is globally the second-largest electric vehicle manufacturer, trailing only China, vehicles are not selling as expected (Lechowski & Weis, 2025). This development has been attributed to a series of misguided management decisions related to product strategies, an excessive dependence on the Chinese market, and industrial policy measures that were implemented too late, inadequately, and have since been largely retracted.
2Many scholars have diagnosed policy capture by incumbent interests, indicating a ‘non-conflictual’ and coordination-based mode of regulation between government and industry as an explanatory approach in the German context leading to a careful transformation characterised by weak policy intervention and rather modest R&D push (Mazur et al., 2015; Meckling & Nahm, 2018; Herberg et al., 2020). However, more recent and regulation theory inspired studies have observed a re-orientation in the German governments’ industrial strategy toward a more activist state despite opposition of German industry (Germann, 2022; Schneider, 2023). Jackson (2024) adjusts Meckling and Nahm’s analytical heuristic and considers that in the German transition to electromobility, auto-state-business-relations have become uncoordinated as the state and automobile industry struggle to reach an accord on the appropriate electromobility transition. By highlighting a critical tension between politics and industry, Jackson characterizes this relationship solely in negative terms. Consequently, he does not offer a positive explanation or addresses the crucial regulatory element: the role of the state in establishing industrial strategic guidelines and the ways in which governments try to engage companies in a context of geo-economically motivated statecraft (Staab et al., 2024). This article will fill this research gap by making it its central subject.
3While the German government aims to align manufacturers with political ambitions expressed in the context of “sustainable mobility,” the current state of the industry suggests that this may not necessarily result in a success story. The ongoing challenges underscore the fundamental contradictions inherent in the government-driven sectoral transformation (Lechowski et al., 2023), which attempts to replace an existing, successful business model with an alternative that has yet to prove viable. This raises the question: how can we explain the strategic positioning of the most powerful industry in Germany with regard to the politically mandated phasing out of its core business and the establishment of electric vehicle production, which is currently still not profitable? Furthermore, what contradictory trajectories characterize this transition? The analysis therefore focuses on state-business relations during this transition, examining the interplay between political regulation and corporate strategies. This dynamic does not occur in isolation; rather, it is heavily influenced by specifically developed national modes of growth and companies’ productive models that emerge and constantly evolve within the context of global competitive conditions. In the case of the export-oriented German automotive industry, particular attention must be paid to the markets of China and North America. To adequately understand these complexities, a regulation theory framework will be employed.
4In scholarly literature, the changing political, legal, and economic conditions to make electromobility an inevitability for carmakers (Topuria & Gräf, 2023) have been presented both as a reason for the battery electric vehicle (BEV) transition and as a barrier to it. Several authors have highlighted how economic governance drives market creation through investments in infrastructure and R&D, but also by creating stimulus on the demand side to overcome market barriers (Hildermeier & Villareal, 2012). While the car industry itself has been hesitant to change its established business model before the diesel scandal in 2015, the Federal Ministry of Environment, the electricity industry and various mobility start-ups began pushing for an ecological modernisation by means of BEV until VW took the electromobility initiative (Schroeder, 2021). However, the German state has obviously been ambiguous in its role: while opting for nuclear energy to be terminated in the country, it does not want to trigger a conflictual dynamic in the case of mobility. The German government has protected internal combustion engine vehicles (ICEV) as long as possible and at the same time it has been building up pressure and creating a basis to introduce battery powered vehicles (Haas, 2021b). This resulted in a strategy of a top-down controlled transition that perpetuates car dependence and dominance while merely modernising powertrains, at worst conserving unsustainable structures (Richter & Haas, 2020; Pichler et al., 2021; Keil & Steinberger, 2024). Based on the influence of pre-existing state-industry dynamics of a corporatist concertation (Lechowski et al., 2023), the forces of persistence in fossilistic automobility remain strong. However, the ongoing transformation could radically change the “Model Deutschland,” characterised by strong sectoral associations and proximity to political decision-makers (Haas, 2021a). Several authors consider the government’s reactions to multiple crises – financial crisis of 2008, Diesel scandal of 2015 and Covid-crisis – as accelerators for the BEV transition (Pardi, 2020; Haas, 2021b; Pichler et al., 2021; Thiele, 2021; Lechowski et al., 2023). The Diesel scandal has been identified as a major turning point that led European policymakers and car companies to reverse the longstanding preferential treatment that diesel has received from member states (Skeete, 2017; Pardi, 2022). The strengthening of regulations after the diesel scandal forced carmakers to incorporate air pollutants emissions limits into the planning process and to increase their sales of zero- or low-emissions vehicles (Klebaner, 2018). Scholars have a critical view of the influence of German politics on European legislation. With its aim to protect most profitable premium brands, Germany negotiated weight-based standards. This grants exceptions and compensations for German manufacturers with heavy vehicles, which consequently have become even bigger and heavier (Haas & Sander, 2019; Pardi, 2021, 2022). At the same time, the system of supercredits has allowed carmakers to count electric vehicles several times, which in fact has benefited the ICEV as they can emit more with traditional ones (Thiele, 2021).
5This article draws on those findings and further develops the contradictory yet symbiotic state-business-relations in the German transition to electromobility that has so far been understudied. In this sense, this article aims to carve out the reasons and trajectories in the transition of a core industry. It counters normative perspectives that suggest alternative approaches that could have been taken. Instead, it presents a political economy analysis to elucidate why actions were taken as they were, what political economic contradictions underlie this program, and what progress and challenges have emerged as the industry navigates its current crisis of declining profits. Section 2 introduces a strategic action field approach with analytic categories based on regulation theory along with its analytical operationalisation through qualitative content analysis. On that basis, section 3 chronologically reconstructs the German transition to electromobility and presents interdependencies between political regulation, international competition, and carmakers strategies.
6To comprehensively capture the dynamic interrelationships among political regulation, global market developments, and entrepreneurial strategies, a strategic action field perspective serves as an appropriate analytical lens, complemented by regulation theory tools. First, to thoroughly understand market transitions, it is crucial to examine the specific interests and resources of concrete actors and the context in which they operate. This is what the concept of strategic action fields covers. For Fligstein and McAdam (2015),
[a] strategic action field is a meso-level social order where actors (who can be individual or collective) interact with knowledge of one another under a set of common understandings about the purposes of the field, the relationships in the field (including who has power and why), and the field’s rules.
- 1 This article, does not focus on challengers, a third actor position identified by Fligstein and McA (...)
7In this context, local understandings and conceptions of control are paramount: local cultures—historically established by a field’s dominant actors—prescribe how competition will work in a given market and provide actors with cognitive frames to interpret the actions of others. The notion of conception of control refers to the ways in which social actors perceive their ability to control their actions and the environment they are part of. The conception of control shapes the way a social actor evaluates, behaves, competes, and tries to create and preserve a stable field by assuring the cooperation of other actors within or related to a given field. As a consequence, conceptions of control shape the collective field dynamics (Fligstein, 2001). The concept of strategic action fields allows to analyse the field-internal relations and dynamics between incumbent actors, challengers, and government units, their transitions from stability to piecemeal change and finally to radical transformation. Fields are structured, essentially, according to the distribution of resources between actors and their hierarchical position within it, which leads to the emergence of socially constructed arenas where actors cooperate and compete. Strategic action fields can therefore be understood as “fundamental units of collective action in society” (Fligstein & McAdam, 2015). Within the strategic fields of action, we will focus resources and dynamics between incumbent actors and governance units1:
- Incumbents have a fundamental claim to the resources in the field. They therefore exert a decisive influence and their interests represent the relevant organisations within the field. The field of the German automotive industry is divided into the core companies Volkswagen Group (VW), BMW and Mercedes, so called original equipment manufacturers (OEM), and the large suppliers, multinationals like Bosch or Continental, two of the biggest auto part suppliers worldwide, which have revenue and innovation potential similar to OEMs. Their resources are fundamentally economic, derived from their control over capital, which encompasses all relevant factors of production and the strategic decisions regarding their deployment. As pivotal drivers of growth and employment, these actors recognize their influence and capitalize on the fact that the prosperity of the entire location is contingent upon their profit motives. This awareness allows them to leverage their economic power to shape local conditions in ways that align with their interests (Figure 1).
Figure 1. Key figures of German OEMs (2023)
|
|
VW Group
|
Mercedes-Benz Group
|
BMW
|
|
Car sales
|
9.2 mio.
|
2.04 mio.
|
2.5 mio.
|
|
Turnover
|
322 bn€
|
153 bn€
|
155 bn€
|
|
Employees
|
Global
|
684.000
|
166.000
|
155.000
|
|
Germany
|
298.000
|
No official company data
|
There are also small and medium-sized enterprise (SME) suppliers, often highly specialised, in this incumbent supplier group. About one fifth (€79.7 bn) of the turnover and around 70% of the value creation in the German auto industry is realised by suppliers. However, since OEMs determine vehicle product policies, this analysis will concentrate specifically on their strategies. By examining the approaches taken by OEMs, we can gain insight into how their decisions influence market dynamics and shape the broader landscape of the automotive industry.
- Governance units are organisations within the field that guarantee the seamless functioning of the system by ensuring that the rules are followed. These governance units are usually led by the incumbents and secure the existing conditions in the event of conflicts. The business association VDA (German Association of Automotive Industry) is the decisive governance unit. It mirrors the heterogenous structure of the German car industry, uniting more than 650 manufacturers and suppliers. Correspondingly, the VDA is not a monolith. Rather, it consists of extremely heterogenous and highly conflictual stakeholders. However, the core companies massively shape the associations’ orientation. Internally, the main challenge is to establish a common strategy that incorporates the interests of the various competing stakeholders. Externally, the association acts as a representative for the entire industry and, as a lobbying entity, presents demands to policymakers. In this regard, the capital power of the corporations—which generate growth and employment through their operations—constitutes the most significant resource. Concerning labour organisation and conflicts, the metal union IG Metall plays a major role as governance unit, with more than 90% of unionisation in several plants. Collective company agreements and so-called “future agreements” have so far prevented company-specific layoffs and plant closures.
8Based on the strategic action field approach, the power dynamics within an industry can be differentiated, where, due to capital power, the strongest actors essentially define the direction in which the entire sector moves, driven by their economic profit interests, and seek to align the other involved stakeholders with their objectives. In this context, the industry appears homogeneous despite its inherent heterogeneity. The pursuit of a common agenda and internal stability within the field represents a conflict-laden struggle among the participating actors.
9Second strategic action fields are embedded in a complex environment of other fields. Political regulation has a direct influence on the field, maintaining the institutional conditions for stable organisational fields yet also providing stimulus for change (Fligstein, 1993). Regulatory regimes at both national and international levels play a critical role in shaping the way companies accumulate capital, a process often referred to as the accumulation regime. These regulatory frameworks, along with industrial policy measures, significantly influence the structure and dynamics of markets. Politics both constrain and enable industrial activity by setting the stage to change or reproduce institutions over time. More than “some vague exogenous influence that overhangs economic sectors and imposes its orientations upon them,” politics can be considered ”an integral part of collective actor and public-policy making“ (Jullien & Smith, 2011). While political regulations aim at facilitating capital growth, they do so in accordance with the political discretion of governmental authorities, e.g. concerning labour and environmental protections, suggesting an inherent tension between capital interests and political objectives. Key resources in this context include legislative power, sanctions, and credit, as well as external factors such as trade policy. While scholars have highlighted the role of statutory frameworks in establishing equitable competitive conditions (Boyer & Freyssenet, 2002) through tax rates, infrastructure, and education, recent years have seen regulation theory-inspired authors emphasize the growing significance of vertical measures with targeted interventions in specific sectors and the aim of creating “European champions” (Schneider, 2023) by promoting new business areas up to the point of profitability on one hand, and on the other hand, compelling mature industries to move in a specific direction, particularly toward green industries (Schadt & Weis, 2022). New industrial policies emphasize the utilization of state funds to influence market dynamics—changing risk-return profiles and providing incentives aimed at attracting private capital into sectors prioritized by the government (Gabor, 2023). This trend has ignited discussions on entrepreneurial state and mission oriented industrial policy (Mazzucato, 2018), state capitalism (Alami & Dixon, 2023), the European investor state (Lepont & Thiemann, 2024). In addition to political investment and regulatory frameworks, global political-economic structures, interdependencies, and market dynamics significantly influence strategic action fields. This manifests as global competition for market share, where the success of selling manufactured products determines whether companies can realize profits. In this context, resources are rooted in capital strength and the specific productive models that companies employ to compete. While German carmakers rank among the most powerful companies in the global automotive industry, they are increasingly facing setbacks, necessitating adjustments to evolving market developments.
10In concrete terms, in the last four decades, the German automotive industry has developed a productive model that has been characterized in the literature as “German model of automotive production” (Lechowski & Weis, 2025). This model is set against the backdrop of a mode of growth marked by export orientation and high wages in industrial production, accompanied by strong trade union representation (Boyer & Freyssenet, 2002). German manufacturers have established significant production capacities, particularly in Central and Eastern Europe (Krzywdzinski, 2014), as well as adopting a “produce where you sell“ logic (Herrigel, 2015) by situating operations in close proximity to key markets, most notably in China and North America. Despite these relocation efforts, German manufacturers have retained a strong domestic production base, where they primarily produce margin-intensive premium vehicles. Furthermore, many of these facilities frequently serve as lead plants, outlining their strategic importance within the overall production network (Krzywdzinski, 2017). However, the ongoing transition to electromobility creates significant new adjustment pressures and leads to incremental changes that may undermine key characteristics of this German model (Lechowski & Weis, 2025).
11In light of this fundamental orientation, it is essential to examine the profit strategies of German manufacturers in the transition to BEV. Profit strategies comprise productive organization (e.g., platforms, value-chain management, and production locations), employment relations, and product policies (Boyer & Freyssenet, 2000). The primary focus of this study is on how each enterprise-governance compromise impacts the companies’ productive models. In this context, particular emphasis is placed on entrepreneurial product policy, as it shapes the market offerings of these enterprises. It is crucial to consider how the implementation of such policies intersects with the dimensions of productive organization and employment relations, as these factors play a significant role in determining the overall effectiveness and sustainability or crisis of profit strategies in the competitive landscape of the automotive industry.
12To grasp the conceptual ties between political and industrial activities, a qualitative content analysis (Mayring, 2022) is conducted. The textual data has been systematically categorized based on the categories derived from the conceptual framework to identify patterns, themes, and meanings. This systematization has been adapted in an iterative process according to the insights gained from the analysis of the material, allowing for the refinement of categories to better reflect the complexities of the data. As emergent themes and unexpected findings surfaced during the analysis, the original conceptual categories were revised to accommodate these insights, ensuring that the final framework responds to the nuances of the interplay between political actions, global market developments and industrial strategies.
13The field-external influences mark the beginning of the study since the political initiatives have triggered the start of the electromobility debate in Germany, and the rise of global challengers amplified the issue. To explore the field-external impacts on the electrification of the German automotive industry, the study analyses programmes and laws concerning emission standards subsidies, investments, and tax incentives on the federal level since 2007, when the first industrial policy programmes for electromobility emerged. They are complemented by other governmental documents and press releases that detail political objectives, challenges, and steps of realisation. As the German car industry depends on a European and global policy framework, programmes, regulations and press releases from the EU and industrial policy developments in China and the USA are analysed, too. Based on information requests to German state authorities a detailed analysis of trade and daily press articles is conducted, too, to review the course, consequences, and evaluation of those programmes.
14The field-internal dimension represents the corporate actors that constitute the German automotive industry. Those express their claims and interests in strategy papers, annual reports, and model policies regarding BEV. The study focuses on OEMs and the biggest suppliers as they cover a vast spectrum of products and therefore represent different degrees of concern and conversion regarding electromobility. Detailed press research reveals the nature and volume of capital investments, model novelties, patents, production capacities, cooperation, statements concerning electromobility goals, productive orientations, and reactions to policy measures. Furthermore, VDA press releases allow to examine the joint advocacy of carmakers for government incentives or against restrictive regulations. These releases also document the search for a common position among association affiliates and the results of that consensus finding. The focus categories concerning the field-internal dynamics and conflicts are, first, the actors’ objectives and interests, their strategies and resources, and the contradictions they provoke pursuing them. The second category is how actors deal with contradictions that arise for them and attempt to influence both their immediate, field-internal, and field-external environment in their favour. This way, trade-offs, considerations, and forms of progression in the contradictory restructuring can be illustrated, also regarding their temporal dimension. Beyond that, the analysed focus categories are fundamental to make the conceptual ties of state-business relations apparent. The analysis brings together field-external and field-internal dynamics by relating political claims, regulations, and global market evolutions to the corporate actors’ interests, strategies, and realisations by means of an iterative research process that reconstructs the transformation of the German automotive industry towards BEV. This leads to the conceptual analysis of market transformation as a dialectical process developed along the empirical material. The analysis thus reveals how the interplay between field external influences and field internal dynamics contributes to shaping a new conception of control.
15As the transition to electromobility is an evolving process spanning several time periods, the temporal dimension of the interplay between political regulation, market developments, and entrepreneurial strategies is crucial. In the qualitative analysis of the data, different time periods were identified and consolidated to guide the presentation. On one hand, this categorization was informed by temporal classifications in the literature (Schroeder, 2021; Thiele, 2021; Loder et al., 2024); on the other hand, these classifications were adapted according to the specific research questions and data relevant to this study. The structure of the empirical section follows a chronological logic, utilizing a systematic and ideal-typical approach. Within each chronological section, the analysis encompasses two primary dimensions:
- External influences on the field of the German automotive industry: this includes an examination of political regulations and the development of global competition that shape the industry’s landscape.
- Internal dynamics within the field of the German automotive industry: this segment focuses on the strategies and actions of manufacturers, as well as their positions and demands directed towards policymakers, incorporating perspectives from manufacturers, the VDA and IG Metall.
16The concrete implementation of this methodology, however, adapts to the concrete subject matter and the actual developments, as well as the respective focal points identified through the material-based analysis. This proceeding ensures that the framework is not artificially imposed on the material, but rather that it is organically informed by it. This justifies stronger emphases on external influences, for example, in section 3.1, or the need to revisit certain regulatory or corporate aspects in section 3.3. Such flexibility allows for a nuanced and responsive analysis that accurately reflects the dynamics within the field and the interplay between external pressures.
17The automotive industry represents a core element within the broader regulatory perspective of the federal government concerning the nation’s growth potential and resource management. Regarding the reliance on fossil fuels, particularly in relation to vehicles manufactured by German companies, the government recognizes a critical dependency, notably on the global oil market. The government’s ambition involves overcoming this dependency by reducing the reliance on oil and fostering energy autonomy through the development of renewable energy sources, aiming to transform the world energy market, in which Germany itself aspires to set standards and conditions. (BMWK, 2023). Within this context of an overarching ambition to reorganize the global energy market, the German government has implemented since 2007 electromobility-specific industrial policy measures. The fact that the German BEV transition is, first and foremost, part of the German government’s programme of substituting an energy source for another is an elementary cornerstone of the German transition that has been largely overseen in the literature. It constitutes the political economy core of the transition, which challenges the widely shared assumption that the German state is merely reacting to climate-related necessities, expressed in emission limits. However, while the specific measures and actual outcomes of this program depend on prevailing against global competition, those policy objectives and guiding principles are crucial examining the shaping of carmakers’ conception of control concerning electromobility, as embedded in this geoeconomic policy perspective (Staab et al., 2024).
18The regulatory perspective of the government consists in the idea that the automotive industry should contribute to the political agenda by turning BEV into a profitable business. From a political-economic standpoint, this encapsulates a fundamental contradiction: the government seeks to encourage manufacturers to engage in a business that aligns with its policy objectives, even though it is not yet a viable market and manufacturers currently have limited interest in it. Engaging in this business must be a free market decision by the companies involved. Thus, the primary objective of the political authorities is, in the initial step, to establish the foundational conditions necessary for this business. To contribute to this objective, it is essential to transform the central component of the competitive strategy within the German automotive industry, which is the ICEV powered by fossil fuels. Employment figures reflect the significance of the drivetrain segment in Germany with, 250.000 employees out of a total of 880.000 in the automotive industry in 2016.
19In an initial phase between 2007 and 2015, the government took measures for market preparation: it promoted basic research, four regional pilot projects, and traffic law advantages for EVs and initiated in 2009 the “National Platform Electromobility,” a broad-based alliance of actors with representatives from industry, associations, and unions, whose establishment Haas describes as “half-hearted” (2021a). Political initiatives of this period until 2015 are targeted to lay the technical foundation for a business yet to come. The economic stimulus package II in reaction to the financial crisis of 2008 has been the first government investment in electromobility. However, it is important to note, that this package also included the so-called Abwrackprämie, a financial incentive to encourage the replacement of older vehicles with more environmentally friendly models, that were at the time all ICE vehicles. Regarding its direct impact, the policy program before 2015 revealed to be very light. The VDA and IG Metall call those measures “nice enough, but it doesn’t really do much to help electric mobility take off in the market” and advocate for more financial incentives.
20Consequently, the carmakers’ product strategies consist of recognizing a market opportunity, yet they perceive this potential as limited. German car producers do not find the prospect unappealing, they took up the topic discursively in the 2010s (Thiele, 2021), and dedicate small R&D amounts to electromobility. At the same time, they did not consider BEV to be a valid business model yet as the required charging infrastructure barely existed, battery production was still expensive, and technical problems persisted. Therefore, most of the 13.000 BEVs on German roads by 2013 were Korean and French models. It was as of 2013, that BMW was the first German car maker with BEV series production. However, the model did not achieve significant success and was phased out in 2022 without a direct successor. VW followed in 2014 with the e-up!, a small car that has had a success while purchase bonuses doubled during the Covid-pandemic, but has been phased-out in 2023. Mercedes-Benz introduced its first BEV series model only in 2019. The technological basis for electric cars were model platforms on which ICE as well as gas, hybrid, or electric drives are built. This allowed economies of scale to be exploited in production while mitigating the risk that came from not knowing which technology would actually become the dominant design (Altenburg, 2014).
21At the same time, industrial policy measures in China and the US, the most important foreign markets for German carmakers, have begun moving their car producers to electromobility. Starting at about the same time as in Germany, subsidies for battery production and purchase premium were part of the policy measures from the beginning in the US as well as in China. Sales figures reflect the success of those measures already few years later and start indicating a rapid scale-up of electromobility, when in 2015 about 247.000 BEVs have been sold in China—compared to only 18.000 in 2013.
22Overall, until 2015, electromobility has become a focus on the political agenda in Germany, with various initiatives and platforms established to promote its advancement, while carmakers take up the topic discursively. However, these efforts are hardly supported by material resources, particularly when compared to the leading markets, such as China and the United States, where pioneering electric vehicle companies benefit from a more favourable environment.
23The revelation of software manipulations related to diesel engines in the United States in 2015, involving Volkswagen, Audi, BMW, Mercedes, and Bosch, has not only posed a significant threat to the diesel engine but has also placed “made in Germany” products in an existential crisis. This concern has been echoed by policymakers, who have accused automotive companies of committing “unforgivable errors” and risking “a significant amount of harm,” as noted by Chancellor Merkel, who emphasized the potential impact on Germany’s overall economic strength. From the regulatory perspective of German policymakers, there is an imperative to restore the industry’s image and mitigate damages while simultaneously working to preserve diesel technology. The goal is to ensure that the established competitive strategies of the automotive sector are not irreversibly devalued and that the industry remains a central pillar of the nation’s economic landscape while simultaneously transforming in response to the rise of alternative drivetrains.
24All policy measures supported by the German government reflect this ambivalent approach. The initiatives through which German policymakers exert influence on manufacturers are thus dual-faceted, aiming both to preserve diesel technology while simultaneously facilitating its gradual replacement with BEV. To achieve this dual goal, a corresponding policy combination encompassing both restrictions and incentives has been established. Among the restrictive measures is the obligation for manufacturers to carry out software updates at their own expense for vehicles already sold. This requirement is intended to prevent driving bans in inner cities, which, in Germany, are set to be implemented starting in 2019 for vehicles that do not meet the Euro 6 emissions standard. At the same time, on the European level, emission limits were tightened in 2015, reducing the permissible emissions from 140 to 130 gCO2/km. However, as weight-based CO2-standards are still in place, emission limits are certainly stricter but not different, leading to an accelerated upmarket drift (Pardi 2022).
25In terms of supporting electromobility, the shift in policy has resulted in a significantly more assertive approach than during the initial phase. The government has moved away from its previous “subsidy-free course,” indicating a recognition of the need for financial incentives and support to effectively promote the adoption of electric vehicles. The financing of infrastructure and sales (environmental bonus) began in 2015, creating the technical basis for the use of BEV (Figure 2). The political-economic implication of the purchase bonuses consists in a reversal of economic conditions in the automotive sector: instead of living off the labour and consumption of this industry, the state provides the corresponding consumption. One essential characteristic of the purchase bonus has largely been overseen in previous studies: the state subsidy was subject to the condition that, for the subsidy to be approved, carmakers had to grant the buyer at least the same amount as a discount (until the state aid was doubled in the context of the corona crisis). Therefore, the purchase bonuses are more than a mere supportive offer to the carmakers, but included their own financial contribution to it.
Figure 2. Main policy measures concerning electromobility in Germany
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Incentives
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Volume
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Restrictions
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Policy level
|
Timeframe
|
|
|
Conversion of the motor vehicle tax to a pollutant and CO2 basis
|
Federal Government
|
Since 2007
|
|
Economic stimulus package II: financing of R&D and pilot projects
|
1 bn€
|
|
Federal Government
|
2009-2013
|
|
Regional pilot projects
|
180 mio.€
|
|
Federal Government
|
2013-2015
|
|
Advantages for electric cars (e.g. vehicle tax exemption for 10 years for BEV; advantages in traffic law)
|
|
|
Federal Government
|
Since 2015
|
|
|
CO2-emission limits:
2015-2019: 130g/km
2020: 95g/km
2025-2029: CO2-reduction of 15%
From 2030: CO2-reduction of 37.5%
|
European Union
|
Since 2015
|
|
Supercredits: vehicles consuming less than 50 gCO2/km in the driving cycle can be counted more than once
|
|
|
European Union
|
Since 2014
|
|
Environmental bonus for purchasing electric vehicles
|
10 bn€
|
|
Federal Government
|
2015-2024
|
|
Financing of infrastructure
|
3 bn€
|
|
Federal Government
|
2015-2025
|
|
Financing of R&D in battery cells (no financing of new projects from 2025)
|
1.5 bn€
|
|
Federal Government
|
2021-2025
|
|
IPCEI Subsidies for battery production
|
2.9 bn€ (Federal Government)
|
|
Federal Government and European Union
|
Since 2021
|
26Ironically, in the years immediately following the diesel crisis, it was not global market developments that penalized German manufacturers, especially VW. Two years after the scandal, the company emerged as the global leader in sales. However, to make up for external reactions of fines, VW considered electromobility as a way to repair the image damage and to regain consumer trust and stakeholder confidence (Jung & Sharon, 2019). Additionally, the market evolution in the US and, especially, China has begun to highlight the potential of global electric vehicle markets.
27In light of the immediate consequences of their fraudulent practices, the emerging restrictions on ICEV, and the increasingly apparent global market opportunities, German manufacturers are pursuing a dual approach, both exploiting and expanding the potential of ICEV while actively initiating the transition towards electromobility. They are undertaking government-mandated software updates and continuing to operate their ICEV businesses. Regarding emission limits, the industry’s response consisted of utilizing new technologies to further optimize fuel consumption and CO2 emissions (Pardi, 2022). On the other hand, German manufacturers are beginning to recognize the necessity of transitioning to electromobility and are proactively addressing this shift. As politically mandated thresholds tighten, the production of BEV is becoming increasingly essential to comply with these regulations—especially since the production of ICEV is set to continue, necessitating a balance against fleet emissions limits. This pursuit involves fundamentally gaining control over the foundational technologies that will shape future advancements in the automotive landscape. Notably, since 2017, German car manufacturers have secured the most patents in the field of electric propulsion worldwide (Statista, 2023), reflecting a political-economic strategy to ensure exclusive access to crucial technological innovations. However, the quest for control and the opening of opportunities does not equate to an immediate pursuit of market leadership. This is particularly evident in the dismissive attitude of German OEMs towards emerging challengers, encapsulated in the sentiment: “Let them do their thing; when the time comes, we will catch up.” Nevertheless, manufacturers are beginning to invest seriously in genuine BEV strategies, as evidenced by their product and model policies. This trend is particularly pronounced at VW. Technically, VW has taken a pioneering role among German OEMs. Since 2015, the company has focused on developing the Modular Electric Drive Toolkit (MEB) platform, specifically designed for BEV, with the first model launched in 2020. This strategic initiative highlights VW’s commitment to leading the transition towards electromobility within the automotive industry. Both BMW and Mercedes maintain a technological openness, focusing on various drivetrains, including plug-in hybrid electric vehicles.
28While all manufacturers at this point recognize the necessity of producing electric vehicles, there is a lack of clarity among them, as well as within governance units, regarding the pace and fundamental nature of the transition. Both VDA and IGM acknowledge that electromobility is a business to be embraced; however, IGM cautions about potential job consequences and perceives automotive companies as ill-prepared for this shift, emphasizing the need for careful consideration and job guarantees. This uncertainty has led to internal disputes within the VDA regarding the strategic direction of the industry. It underscores the desire among various stakeholders for a unified conception of control and highlights the competition among them to assert their respective visions for the future of drivetrains. The association has been put to the test when VW, demanding a stronger commitment to BEV, threatened to quit the group in 2019. This conflict became existential as most members did not share this position, especially numerous big and small supplying firms with an orientation towards ICEV-related products. VW, its largest member, warned emphatically against irrational debates over alternatives and VW released a strategy paper, stating that the focus would primarily shift towards promoting small, exclusively battery-powered vehicles, marking a departure from the principle of technology neutrality. However, other automakers contended that this shift primarily benefits VW since, at that time, BMW and Mercedes produced significantly more hybrids than pure BEV and criticized the plan as likely leading to market distortions. After days of public disputes, VW made some concessions, agreeing to promote hybrid vehicles alongside battery-powered cars. They also jointly emphasized the need to expand and support charging infrastructure. As a result, the industry found itself in a position similar to where it had been prior to the dispute. Nevertheless, VW’s intervention ensured that the VDA and other manufacturers committed more seriously to advancing BEV. However, disagreements regarding which types of drivetrains should be considered persist. Since 2020, VW has resisted the higher targets for hydrogen and synthetic fuels advocated by the VDA. VW argues that fuel cells are too “complex, cost-intensive, and inefficient” and that the focus should instead be on advancing BEV. VW considers that the VDA’s approach undermines their BEV-focused strategy. However, in 2020, VW’s subsidiary Porsche announced plans to advance the development of synthetic fuels, asserting that relying solely on BEV would not be enough for timely progress. This indicates an ambiguity within VW regarding a cohesive cross-company conception of control. This ambiguity is further amplified by the ongoing challenges in the German electromobility transition, as will be explored in the following subsection.
29From 2020 on, the German government has intensified the more proactive industrial policy stance regarding electromobility. This shift is characterized by increasing vertical industrial policy orientations aimed at fostering the growth of the electromobility sector. However, it also highlights the intensification of contradictions that were established in the earlier phases. Specifically, the political financing of the transition reveals its limitations, as the existing support frameworks come under strain. Furthermore, the transition of German manufacturers to electromobility faces a new dimension of crisis in a context of growing global competition.
30Initially, in response to the COVID-19 crisis, the German government has intensified its investments, viewing this period as an acceleration of previous initiatives (Lechowski et al., 2023). A key component of this response has been the environmental bonus, which was doubled in the wake of the pandemic. Furthermore, there was a mandate for public authority fleets to purchase electric vehicles, thereby guaranteeing sales. Since the introduction of the environmental bonus in the summer of 2016, a total of 2.23 million electric vehicles have received governmental support (1.43 million BEV). Overall, the Federal government has disbursed over 10 billion euros in purchase funding (Bundestag, 2024). The expiry of the hybrid subsidy from 2023 signalled a technological commitment to BEV—a shift that VW had been advocating since 2019 but had temporarily set aside in favour of a collective position within the VDA. Nonetheless, also the purchase bonus for BEV is eliminated earlier than anticipated, starting in 2024, after an intensive budget debate. As in many other European countries, the purchase bonus is also set to expire in 2024.
31The support for charging infrastructure was also expanded during the pandemic. Since 2015, the federal government has invested nearly 3 billion euros in public and private charging infrastructure. However, the last funding program is set to expire at the end of 2025. Closely linked to the issue of charging infrastructure is the availability and distribution of electricity within the power grid. This highlights the government’s fundamental approach of establishing a growth model by adjusting the regulation in a manner that facilitates the business operations deemed necessary by the government. As the ramp-up of electromobility alters the demands on distribution networks, the German government has adjusted regulations to enable distribution network operators to invest in the intelligence and controllability of the grids and to expand their capacity (BMUV, 2020). The political-economic significance of this intervention consists in creating the conditions to enable companies to do in their own interest what they are supposed to do according to the government’s interests.
32Finally, there is significant policy involvement concerning value chains, highlighting the vertical policy orientation of the government. Since 2021, the Federal Ministry of Economics has allocated over 1.5 billion euros to battery cell research and production projects (BMWK, 2024). To secure the automotive access to battery production, which constitutes up to 40% of the BEV value chain (Boewe & Schulten, 2023), the federal government and the European Commission fund and subsidise through new instruments such as Important Projects of Common European Interest (IPCEI) for batteries, with Germany participating in two major projects with a total of €2.9 bn. Among the companies involved are BMW, Opel, Tesla, and supplier Northvolt. However, many of these projects are facing challenges during implementation. According to Transport & Environment (2023), 80% of all announced projects are at risk. In addition to support measures targeted at the development of battery-specific products, the federal government is making political investments in regional transformation networks aimed at converting internal combustion engine component suppliers. This is intended to compensate for the decline in activity mandated by political decisions and the eventual phasing out of traditional ICEV. However, this initiative is limited to four years and has a manageable budget of up to 200 million euros per project.
33However, the political influence in the industrial sector encompasses more than just investments and incentives aimed at facilitating the establishment of new business models. The tightening of European fleet emission limits following the Diesel scandal—set at 95 gCO2/km from 2020—has made the production of BEV a necessity for automakers to comply with fleet emission standards. Manufacturers have begun to incorporate potential fines for exceeding these limits into their planning, even though such fines have thus far remained relatively minor. For instance, VW paid 100 million euros for the year 2020. Nonetheless, carmakers regard these penalties as unproductive costs that should be avoided, especially since European manufacturers faced potential fines of up to 83 billion euros in 2020 for non-compliance, and penalties of up to 15 billion euros projected for 2025. In this context, electrification emerges as the only viable pathway forward (Klebaner, 2018; Pardi, 2022), particularly given the impending ban on the sale of ICEV set to take effect in 2035, which was formalized in 2023. This regulatory framework places substantial pressure on traditional ICE business models, manifesting the absolute, unnegotiable character of the transition to electromobility. At this point, it became clear that the transition, on the medium and long term, will not merely be an add-on but actually substitute the entire ICEV business.
34The vertical industrial policy stance aimed at strategically supporting key industries has been implemented even more vigorously in China and the US. The Chinese government has introduced a quota for electric cars since 2019 and invested at least $230.8 billion in the EV industry between 2009 and 2023, with annual investment amounts increasing from approximately $6.7 billion in the early years to $45.2 billion in 2023 alone. Additionally, the purchase incentive has been extended until 2027, further stimulating demand. Similarly, in the US, the Inflation Reduction Act (IRA) in 2022 introduced additional purchase incentives and subsidies for establishing production capacities, totalling $400 billion in support. This legislation has prompted many companies to reconsider their investment plans in Germany and Europe in favour of the US. However, it is anticipated that the Trump administration may soon move to terminate electromobility-specific subsidies.
35Against this background of developments influencing the German automotive industry, the transformation of German manufacturers is undeniably underway. Germany has emerged as the world’s second-largest producer of electric vehicles, following China and ahead of the United States. The production and marketing of BEV have become critical areas of focus for German manufacturers, as they integrate electromobility into their product policies and organizational structures. However, there are noticeable differences among manufacturers in how they approach this transition (Loder et al., 2024).
- As for the platforms, the technical foundation of production and vehicles, all VW models of the “ID-family,” covering the segments of compact, limousine, SUV, and bus, are produced on the same platform. Besides, premium brands Porsche and Audi produce their BEV models on the Premium Platform Electric, showing the ambition of VW to diversify its model approach and to have a specialised offer in every segment. The development of the Scalable Systems Platform, announced for 2026, represents VW’s strategic vision to have one single platform for all brands, aiming at economies of scale and increased control over the model development of the various brands. Mercedes introduced its Modular Architecture platform in 2023. Meanwhile, BMW is also transitioning towards BEV, albeit at a slower pace and still using a hybrid platform. This underscores a more moderate transitional approach, accommodating combustion and electric powertrains, except for the iX model. However, BMW announced a BEV platform for 2025.
- Regarding the manufacturing plants, a complete restructuring of certain facilities is observed in the case of VW, whereas Mercedes and BMW produce various drivetrains on the same production lines. This allows them to adjust the production capacity of individual facilities in response to the demand for specific types of drivetrains. In contrast, VW’s plant in Zwickau, which has completely transitioned to BEV production, has experienced a significant decline in overall demand affecting the plant’s utilization. Consequently, the future of this facility has been regarded as uncertain at times.
- Concerning supply chains, the effort to establish independent production capabilities cannot obscure the increasing dependencies on primarily Chinese suppliers. However, there is a stronger concentration of production in Germany compared to ICEV, although Central and Eastern Europe regions, particularly Poland and Hungary, are emerging as relevant production locations for BEVs as well (Pardi, 2022; Lechowski & Weis, 2025). The German OEMs adopt different strategies regarding battery cell production, the most critical BEV component, accounting for up to 40% of the value creation. All manufacturers primarily procure their battery cells from Chinese producers, particularly CATL, which also produces in Germany since 2023. It is noteworthy that VW and Mercedes, unlike BMW, are engaged in constructing battery cell plants both in Germany and globally. However, these projects are smaller in scale than initially announced and, in some cases, have been suspended (e.g., VW is progressing with only three out of six planned projects; ACC with Mercedes’s involvement in Kaiserslautern is on hold; supplier Northvolt has declared insolvency). It is evident that there is a significant reduction in the proportion of components sourced from Germany, alongside a notable increase in components procured from China and South Korea. In the case of the VW Golf 8, 60% of its components are sourced from Germany, with 12.9% coming from Asia. In contrast, the ID.3 consists of only 27.3% of components from Germany and 32.7% from Asia (Boewe &Schulten, 2023).
- Concerning product policies, the German OEMs transpose their premium orientation to BEVs (Pardi, 2022; Lechowski & Weis, 2025). The German OEMs aim at bigger margins as batteries are still expensive and therefore less profitable in the segment of small cars. VW’s first “native” BEV, the compact model ID.3, introduced in 2019, was positioned above several less expensive competitors such as the Nissan Leaf or Renault Zoe—although below the slightly larger Tesla Model 3. Most of the BEV models by all VW Group brands released in the past few years were positioned in segments above the compact class. VW still struggles to establish an offer in the price segment below 25.000€. The release of the models in this category have been postponed to mid-2026. Mercedes and BMW have followed even more pronounced premium BEV strategies (Lechowski & Weis, 2025).
36However, what has been successful in the ICEV era, reveals to be in crisis in BEV transition. While production processes are currently being ramped up across all companies, they are facing a crisis, as evidenced by the sales figures.
Figure 3. Annual Battery Electric Vehicle sales
37In China, a significant market is growing, yet German manufacturers are competing against newly emerging players. China is by far the biggest market with more than 6.3 mio. BEV sales in 2024 (Figure 3). Although German producers sell more than one third of their cars in China, they have hardly even played a role with only 5% market share. As a result, their total market share has dropped from 24% in 2019 to 19% in 2023. On the North-American market, German carmakers have achieved better results. However, their US BEV market share also dropped from 12.4% in 2023 to below 10% in 2024. In Europe, although German manufacturers are strong in the BEV sector, the market experiences declining trends. In Germany, domestic manufacturers were able to increase their market share from 49% to 61% in 2024, but sales also declined by 27%, resulting in over 140.000 BEV sales. Furthermore, the German market is unable to compensate for the Chinese and US markets. Tesla and Chinese producers, such as BYD, have shown considerable growth rates, not only in China, but also by reversing the ratio and exporting their models to Europe, representing a new competitive situation (Figure 4). Although currently still modest, the market shares of Chinese brands in Europe have increased from 2% to 7.6% between 2020 and 2023. This has sparked a debate regarding tariffs at the European level, which German manufacturers, the VDA, and policymakers are collectively opposing in a corporatist alliance to protect the interests of the German automotive industry. This response is motivated by the fact that these manufacturers have begun exporting from China to Europe and are concerned about potential retaliatory measures in the Chinese market.
Figure 4. Largest Electric Vehicles selling companies worldwide (Battery Electric and Plug-In-Hybrid Vehicles combines)
38With regard to the compromise between policymakers and manufacturers, there is consensus on the objective of accelerating the market ramp-up of electric mobility in Germany. However, tensions remain regarding how this goal should be achieved. Incumbents and governance units are increasingly directing their criticism to policymakers. They expect supportive measures from the government to facilitate their business operations and hold policymakers primarily responsible for market performances, which fall short of their ambitious targets. This illustrates a collective effort to advocate for increased support—precisely in the direction that policymakers initially and therefore successfully intended to steer manufacturers. In this context, it may be argued that the state-industry nexus is uncoordinated, as the strategic action field critically addresses and opposes the government, articulating a desire for greater support while also maintaining its stance regarding future projections. However, these discussions occur against the backdrop of a shared conviction that the transition to electric mobility is both necessary and must be successfully managed. Divergent perspectives exist within the governance units concerning the maintenance and enforcement of existing regulatory limits and the ban on ICEV. The VDA emphasizes the need to reassess regulatory limits, IG Metall stresses that while regulatory limits should serve as an incentive, accompanying measures must also align effectively. IG Metall positions itself as the clearest voice for an electric-only transition.
39As a result of their disappointing market performances and the reducing of industrial policy support, German OEMs are compelled to subject their strategies, which have frequently been postponed, to more fundamental reviews concerning their strategic projection. As a result, Mercedes has officially shifted from its electric-only approach to a stance of technological openness, leading to the extended and updated development of traditional ICEV. BMW and Mercedes, for instance, project timelines extending well beyond 2035, while VW plans producing and selling ICEV until 2035—two years longer than previously announced. Ironically, BMW has recently emerged as the most successful among German automakers, being the only company to achieve a global BEV sales increase (13.5%) in 2024. In the same year, sales figures for Mercedes declined by 22%, while VW experienced a decrease of 3.4%. Additionally, in relative terms, BMW sells nearly 15% of all vehicles as BEVs, surpassing both Mercedes (more than 10%) and VW (less than 10%) (Puls, 2024).
40Overall, there is now a clear commitment to electric mobility, driven by global market developments that manufacturers actively seek to capitalize on, and, on the other hand, due to the increasingly stringent regulatory limits set by policymakers, which they must adhere to. This transition is facing a dual crisis: BEV are not selling as anticipated, and political support is being withdrawn for elements that automotive capital considers essential for making their production viable. The state-business relationship reflects contradictions and its symbiotic ideal: the automotive industry expects the government to more actively support the industry to facilitate their profits. Those conditions have prompted manufacturers to adopt specific strategic approaches in both the conception of control and the actual implementation, restructuring, and adjustment of their production capacities. The economic ambiguity for carmakers consists in ramping-up productive facilities of the electromobility business that reveals to be disappointing. This increases their willingness to continue to exploit the existing ICEV business even longer. Although all German OEMs embrace the BEV transition and take steps for its realisation, they still reserve the decision when they consider a comprehensive shift to electromobility profitable.
41The presented findings nuance prevailing judgments regarding the transformation of the German automotive industry. Some authors argued that the corporatist German model is resistant to change and overly cautious in its efforts to avoid leaving any stakeholders behind (Mazur et al., 2015; Meckling & Nahm, 2018; Haas, 2021b). This observation fundamentally captures an important aspect—namely, that German automotive corporations, based on their capital power and their institutionally embedded ties with politics, enable them to mobilize resources to establish favourable conditions for successful business operations in which German politics also has an interest. However, it is essential to precisely distinguish the interests of the various stakeholders involved and the contexts within which they operate. Furthermore, the actual measures that have been undertaken should not be downplayed, nor should the context of developed capital structures, competitive relationships, and business-state relations be overlooked in which these actions take place. The theoretical framework of strategic action field and regulation theory as drawn on in this article have contributed to this differentiated view. In this section, the resulting insights will be discussed in this regard.
42First and foremost, it is essential to acknowledge the fundamentally contradictory nature of political measures regarding ICEV (Germann, 2022; Schneider, 2023). The specific political frameworks and how the industry implements these measures unfolds against the backdrop of this contradiction. The ambitious reason and objective of this policy program is the restructuring of the global energy market by substituting fossil energies. Credible or not—the outcomes of this endeavour will be determined within a competitive context—this represents the ambitious aspiration of German politics. The conflict between the strategic action fields of the automotive industry and politics has, at various times, been diffused, delayed, or ignored; nonetheless, this conflict remains latent and continues to evolve. In scholarly literature, this fundamental contradiction has largely been neglected by appealing to an ecological necessity that is posited as existing outside the state (Klebaner, 2018; Pichler et al., 2021; Keil & Steinberger, 2024). However, what has been insufficiently emphasized is that environmental goals are inherently defined by political actors and only exist as a political program, being an expression of political objectives (Schadt & Weis, 2022).
43This contrast is transformed into a symbiotic interaction that is, however, never devoid of contradictions. There is a fundamental consensus between politics and manufacturers regarding the prerequisites that need to be established; however, the question of how to accomplish this remains unresolved. Another consensus between German policymakers and carmakers concerns the necessity of competitiveness in both the domestic and global markets and positioning regarding trade policy and tariffs, once again with the attempt of German policymakers to influence European legislation in the interest of the German car industry, that has previously been the case in regard to emission limits (Haas & Sander, 2019; Pardi, 2022). Additionally, there is a shared recognition of the importance of achieving profitable production to secure Germany’s industrial base, alongside the necessary adjustments related to employment and labour costs. In this context, IG Metall plays a constructive role by supporting all measures aimed at reducing labour costs to enhance competitiveness. However, it insists that there must be no layoffs due to operational reasons and that plant closures can only occur with its consent. Up to this point, the corporatist approach (Meckling & Nahm, 2018; Haas, 2021b; Lechowski et al., 2023) of the industry is indeed evident, as the various stakeholders involved manage the current transition and its conflicts collaboratively and place significant emphasis on this cooperation.
44As manufacturers are compelled to adapt—exacerbated by the diesel crisis and the accompanying penalties, stricter emissions standards, and global market developments—they concurrently express a desire to embrace electromobility as the new business opportunity and actively engage in it (Klebaner, 2018; Pardi, 2022). This dynamic reflects the influence of external factors on the strategic perceptions of carmakers. Although the transition to electric mobility has not yet aligned with the politically established goals, political regulation, combined with global market trends, have led German manufacturers to acknowledge and pursue this transition actively over the past decade. Considering the industry’s alleged resilience, this accomplishment is far from trivial. The conceptual contribution of this article lies in highlighting this accomplishment, but not as a form of exoneration for the political efforts, which are often viewed through a critical lens. Instead, it provides a regulatory theoretical perspective that emphasizes the state as an entity that fundamentally shapes the orientation of an entire industry. This ability extends even to of the immensely powerful automotive sector in Germany, shaped in accordance with political objectives. However, the government-driven transformation (Lechowski et al., 2023) has also resulted in considerable disruptions—not only for the OEMs themselves but especially for suppliers specialized in internal combustion components, leading to anticipated job losses that are already underway and to which the federal government responds by financing transformation networks in order to mitigate the loss of industrial activity in this sector.
45In this context, the regulatory perspective of politics is to establish the foundations for new business opportunities, which the automotive companies are only willing to invest in to a limited extent and fundamentally reluctant to undertake, as they want to generate business profits and not be bothered with the costs associated with creating the necessary prerequisites. In this regard, the contradiction between politics and industry and its associated uncertainty in the carmakers’ conception of control persist despite a collective momentum for change. The transition is underway, what manufacturers often communicate by stating, “The industry has done its homework,” meaning that they are investing heavily in restructuring their profit strategies. Consequently, the contrast is now manifested in the ongoing criticism from the industry, including IG Metall, regarding inadequate political measures, accompanied by demands for additional actions to stimulate what has thus far been a sluggish business transition. This creates the appearance that the industry wishes to transform but lacks political support for doing so. Such an accusation overlooks two important aspects. Fundamentally, the German transition is rooted in political actions. Furthermore, the criticism presupposes an ambitious expectation on the part of companies that their business must succeed, while insisting that the extensive “framework conditions” necessary for successful vehicle sales—such as investments in research and development, investment in new factories, purchasing power, and charging infrastructure—are not the responsibility of the industry itself but rather fall under the purview of the state’s role in de-risking (Gabor, 2023). There is, however, some validity to this assessment: the government is keenly interested in this transition, underlined by the ambitious goals concerning BEV sales and charging stations that are far from being reached. However, as seen with the withdrawal of the purchase bonus, the state considers a range of other factors that influence its support program for the automotive industry, such as the imperative of fiscal discipline.
46The analysis from a strategic action field and regulation-theory perspective was able to grasp the contradictory endeavour of phasing out a successful model without abruptly dismantling it, while simultaneously establishing a new business model—during a period fraught with multiple crises, from financial instability to diesel controversies and COVID-19, leading to a sales crisis that appears to have solidified. There is an increasingly prevailing certainty that this crisis is not merely cyclical and temporary, but rather structural in nature. To the extent that the transition is proceeding slowly and the automotive industry is declaring its own crisis—evidenced by declining sales figures and profits—and to the extent that there is a lack of shared action between politics and industry, it becomes clear that the auto-state-industry relations are becoming uncoordinated (Jackson, 2024). The underlying positive reason for this phenomenon has been elucidated in this study: the fundamental contradiction within the government-driven electromobility program, which the industry is addressing while simultaneously insisting on extensive support from political authorities.
47In light of weak market performances, particularly—not exclusively—in China, German OEMs are drawing immediate consequences on the side of economic competition: the best response to foreign competition is to enhance their own competitiveness. This has led to widespread price discounts, especially in the Chinese market, as well as the establishment of new partnerships in China through a partial relinquishment of independent development capabilities (Lechowski & Weis, 2025). Moreover, there is an adaptation of global market orientations, with Volkswagen actively working on implementing an “Export Ex China” strategy. Finally, a significant focus has been placed on reducing labour costs to restore profitability, which has met with constructive resistance from the IG Metall, aimed at restoring the competitiveness of the corporations and securing Germany’s industrial base. In one of the largest labour disputes in recent years, the IGM agreed at Volkswagen to a socially responsible reduction of 35.000 jobs until 2030 and the closure of two plants, provided that there would be no operational dismissals. Therefore, the German carmakers are not losing ground; instead, they are mobilizing for an offensive against labour costs and competitors. The rationalization measures implemented by the globally operating German multinationals will surely have consequences that extend far beyond the German production landscape.